Which is the better deal, $10,000 invested at 5%, compounded yearly, for 20 years, or $5,000 invested at 10%, compounded continuously, for 20 years?
Solutions:
→$10,000 investment at 5%, compounded yearly, for 20 years→
→Formula for the compound interest: → A= p (1+i) ^n,
→ p = initial investment
→ i = interest rate per compound period
→ n = number of the given periods,
→ A = amt after n- periods
For the given equation number one: p = $10,000 i = 5%→ .05 n =20 A = 10,000(1+.05) ^20 A = 10000(1.05) ^20 this will be ≈ $26,533
→ $ 5,000 investment at 10%, compound continuously, for 20 years→
→Formula for compound continuously is →
→ A=Pe^rt,
→P=initial investment,